Business for Sale: A Business in the Rough

The business: Imagine a sunny, mildly breezy California Monday morning: perfect golf weather. Now imagine that you own the course. If the fantasy grabs you, you may consider acquiring this 40-acre, nine-hole public golf course. The business is located in the Antelope Valley, a desert area about an hour's drive north of Los Angeles. Eight of the nine holes have water hazards, but the short course is designed to appeal to seniors and high-handicap golfers. The affordable greens fee of $29 for 18 holes of weekend golf (cart rental included) also attracts many beginners. The facilities encompass a putting green, a driving range, and a 2,900-square-foot clubhouse with a snack bar.

A group of 10 partners bought the course as a real estate investment in 1988, just in time for the regional real estate market to land in the rough. They've held on to it, waiting for the right time to sell. For the past two years the brother of one of the investors has managed the property and its cottonwood-lined fairways. He's game to stay the course through a transition period and predicts that the 15-person maintenance and clubhouse staff will likely take to the links for a new owner.

Price: $1.8 million, including $21,000 worth of furniture, fixtures, and equipment. The price does not include the clubhouse, carts, or driving range, which are leased for $1,500, $1,300, and $1,750 a month, respectively. (A new owner should be able to easily assume the leases.)

Outlook: If we were to give the business a golf score, it would be something in the mid 90s. The company is just barely profitable, and business has been down -- from 56,000 rounds played in 1996 to just 38,000 in 2001 -- but the owners haven't done a thing to develop new business. The current manager has no advertising budget and estimates that barely half the golfers in nearby areas have even heard of the course, much less played a round there. A buyer could take simple steps like renting billboards or advertising in local newspapers to boost business. He or she might choose to cater specifically to beginners by hiring a pro and organizing a golf school. An entrepreneur with grander ambitions and access to capital might also consider purchasing land near the course for developing homes or condos or for adding another nine holes.

PEBBLE BEACH IT AIN'T: This fixer-upper golf course is located in California's growing Antelope Valley.

Price rationale: Since the golf course hasn't made much money in recent years, typical pricing formulas -- like a multiple of 8 to 10 times net income -- don't work here. Consider this an asset sale, priced at the cost of the estimated market value of the land. The sellers bought the 40 acres for $1 million in 1988.

Pros: The Antelope Valley's population is growing rapidly, and property values in the area are rising. Plus, hitting the links will become part of your daily work life.

Cons: The business is barely breaking even, and it's going to take extensive promotion and careful management to improve its performance. And it's hard to estimate how much of a return one can expect, given that the business has been lying fallow for more than 10 years. There's a lot of opportunity here but no guarantee.

Comparison shopping: A 9-hole public course in Wisconsin was sold for $1.6 million in October 2002. A 9-hole course in Illinois went for $1.2 million, also in October. And an 18-hole course in Tennessee sold for $2 million in August 2002.

Inc has no stake in the sale of the business featured. The magazine cannot confirm the accuracy of financial or other information offered by the seller. Inquiries should be directed to John Henberger at 760-635-1199 or Gerald Henberger at 949-916-9001, at Henberger Group Inc.